If she is thinking about money, ask your friend if she can re-sell the house for more than what she would get from this deal? 

So, are you purchasing the land, getting it approved for TDR's by the municipality and then marketing and reselling the rights to developers?  

But in any case, even a 1031 exchange will not help you with dealer activities where your intent in buying property is primarily to resell.  

Perhaps converting it to a single family might be a way to resell.

They foreclose and resell the property, they don’t really want to put in the effort (they are both too nice and don’t know how to go about it).

I went the conventional route, which I see now is a mistake because I will have to owner occupy for a period of time before reselling.

I recommend you keep your searches for houses to meet this criteria or similar:  3 bed 2 ba (mostly, sometimes 1.5 bath), 1-2 Garages if re-selling (conversion OK for rent), 1000 sf or larger (prefer 1100+), Brick on Slab best (over Frame), Market Value’s say $85k should keep you away from troubled areas.

It prevents you from selling the house in less than 90-days to a buyer using an FHA mortgage.This restriction also DOES NOT prevent you from reselling a house purchased with a non-FHA loan to ANYONE within the first 90-days.

I'd want some language in there that simply said the penalty only applies if you or one of your entities refinances the loan and that the intent is to resell the properties.  

We have been providing turnkey services to most of the out of state resellers who purchase from us, mark the properties up and resell to their end buyers.